Nigeria's tax reform bill: implications for digital asset holders and transactions

Introduction

As digital assets continue to gain global momentum, the new Nigerian government has moved to bring them within its tax net through the new Tax Reform Bill. The Bill provides clear guidance on the taxation of digital assets, ensuring that transactions involving cryptocurrencies, non-fungible tokens (NFTs), tokenised securities, and other virtual assets are appropriately regulated for tax purposes. The proposed changes reflect the government’s broader effort to expand the country’s tax base and generate additional revenue from previously untaxed or undertaxed sectors.

The aspects of the Bill concerning digital asset and their implications will be discussed under the key headings:

1. Expansion of Chargeable Assets

Under Part VIII Section 34(1) of the Bill, the definition of chargeable assets has been broadened to include all tangible or intangible property forms. This revision explicitly categorises digital assets such as cryptocurrencies, NFTs, tokenised securities, and other virtual assets as taxable assets.

2. Location of Digital Assets for Tax Purposes

To determine the jurisdiction for taxation, the Bill establishes criteria for when a digital asset is deemed situated in Nigeria. According to the new framework, digital assets will be subject to Nigerian tax laws if:

• The person who holds direct or indirect beneficial ownership, control, or interest over the asset is a Nigerian resident.

• The entity holding the digital asset has a permanent establishment in Nigeria to which the asset is connected.

This provision ensures that Nigerian residents and businesses with strong economic ties to the country cannot evade taxation by holding digital assets in offshore accounts.

Taxation of Profits from Digital Asset Transactions

Chapter 2 of the Bill part 1 had imposed taxation on profits and gains on several instances and extended its application to the gains or profits derived from digital asset transactions, including:

• Cryptocurrency trading

• Profits from NFT sales and tokenised assets.

• Income generated from blockchain-based transactions and decentralised finance (DeFi) activities.

By incorporating digital assets into the tax regime, the Nigerian government aims to regulate the growing virtual asset market, prevent tax avoidance, and ensure compliance among individuals and businesses engaged in these transactions.

The taxation of digital assets marks a significant shift in Nigeria’s fiscal policy, aligning the country with global trends in virtual asset regulation. While the new tax framework may pose compliance challenges for digital asset holders, it underscores the government’s commitment to harnessing the potential of the digital economy while ensuring fair and effective taxation. As the Bill progresses, stakeholders including cryptocurrency traders and fintech firms, must stay informed and adapt to the evolving legal landscape.